The UAE is moving ahead in achieving the goal of becoming a cashless economy by 2025 and has unveiled the National Payments Systems Strategy (NPSS) in 2018.
As part of its plans, the Central Bank of the UAE (CBUAE) has chosen Ireland-based IT firm Accenture (NYSE: ACN) to lead a consortium of companies to help execute the strategy.
Accenture will collaborate with SIA, now part of Nexi Group, and G42 to build and operate the National Instant Payment Platform (IPP) over the next five years.
The consortium’s work includes migrating existing payment systems, operating the target financial market infrastructure, and providing the data center infrastructure.
The consortium will also be responsible for delivering many overlay services; examples include overhauling current platforms, systems and two active cloud-data centers and related infrastructure, as well as delivering new capabilities such as e-checks to digitalize check-based payments and a payments application to accelerate adoption.
The new platform lays the groundwork for transforming the financial services ecosystem in the UAE. It represents the beginning for the next generation of payment services in the region, enabling safe, innovative, and convenient electronic payments in the country. IPP is the first significant milestone of the national strategy, allowing real-time payments and fund transfers 24 hours a day.
By providing innovative payment services to participants and their end-users, the IPP will deliver the flexibility needed to respond to the rapidly changing payment market while complying with best practices and international standards, including ISO20022. The new platform will offer ease, speed and a seamless experience for consumers and businesses and will help the financial market infrastructure in UAE become future-proof.
The CBUAE came up with NPSS in 2018 for better customer experience in local and international transactions with an aim to create safer, better regulated, less costly and more efficient payment systems.
Journey To Cashless Economy
The smartphone penetration in the UAE is 91% and 92% people are mobile net users and this makes the job of financial industry easy to develop new products and offer the to the consumers at their doorsteps.
A three-year old study by VISA on cashless cities showed that the annual direct net benefit for consumers, businesses and governments in Dubai would be $2.2 billion. While consumers would get $200 million, government will get $500 million and businesses will gin the remaining $1.5 billion, the study added.
The UAE is ranked eighth in the world and first in the Middle East and North Africa (MENA) region, according to “Cashless Countries Report” released by the UK-based price comparison website money.co.uk. The top three countries in the list are Canada, Hong Kong and Singapore respectively.
The UAE was ranked 20th in the world in 2019 as over 60% of the transactions were digital payment and Dubai was ranked first in the global digital connectivity index, the Euromonitor International said.
Even the World Bank said the UAE was likely to become the first cashless country in the world as 83% of people were having debit cards. The number of Automated Teller Machines (ATMs) for 100,000 people was 61 in the UAE compared with the world’s average of 43, the World Bank added.
One of the main reasons for the UAE to become a cashless economy is the smartphone penetration in the UAE, which is close to 80%, thus paving way for digitalisation in the banking industry particularly for payments methods.
The payments ecosystem has witnessed an exponential growth due to the increasing number of regional and international tourists in the last few years as the visitors use cashless payments during their stay in the country.
Though there was a temporary delay due to COVID-19 related issues, the online sales have gone up substantially during the pandemic times.
Interestingly, a report entitled “Life After COVID-19: Retail” by Dubai Future Foundation (DFF), said leading shopping malls like Majid Al Futtaim (MAF) in Dubai, confirmed a surge in online sales (188%), with a 59% year-on-year increase in online customers in 2020.
Emaar, a real estate company based in Dubai, has set-up a simulated Dubai Mall on e-commerce giant’s website noon.com for customers to shop virtually at many of the mall’s well-known stores.
Dubai has also announced setting up of Cashless Dubai Working Group in November 2020 to fully transform itself into a smart government within four years.
The Working Group will create an action plan to shift all payment transactions in Dubai to secure and easy-to-use cashless platforms across sectors.
The initiative brings together Smart Dubai, Dubai’s Department of Finance (DOF), the Supreme Legislation Committee, Dubai Economy, Dubai Police, Dubai Economic Security Centre, Dubai Chamber, and Dubai Tourism and Commerce Marketing to drive a secure and seamless transition towards a cashless society in the emirate.
In its inaugural meeting in November 2020, the Working Group launched the “Dubai Cashless Framework Report,” developed by Smart Dubai and the Dubai Department of Finance. The Report seeks to promote the use of smart payment platforms for all transactions to phase out the use of physical cash.
The ‘Dubai Cashless Framework Report’ forms part of the Working Group’s efforts to support the emirate’s full digital transition and make Dubai the world’s smartest and happiest city, in line with the objectives of the UAE Centennial 2071 Plan.